An option if exercised would produce a negative cash flow. Out of the money options are therefore never exercised

At the money

An option where the exercise price equals the asset price

Risk management

Strategies to limit the risk of a portfolio

Spread

A combination of two or more call options or put options on the same asset with differing exercise prices or times to expiration.

Warrant

An option issued by the firm to purchase shares of the firm’s stock.

Asian Options

Asian options are options with payoffs that depend on the average (rather than final) price of the underlying asset during at least some portion of the life of the option. For example, an Asian call option may have a payoff equal to the average stock price over the last three months minus the exercise price, if that value is positive or zero.

Currency-translated options

Currency-translated options have either asset or exercise prices denominated in a foreign currency.

Digital Options

igital options, also called binary or “bet” options, have fixed payoffs that depend on whether a condition is satisfied by the price of the underlying asset. For example, a binary call option might pay off a fixed amount of $100 if the stock price at expiration exceeds the exercise price. The Chicago Board of Options Exchange lists binar y options on the S&P 500, but, to date, trading volume has been limited.